State appeals court says ‘Not so fast’ to hedge funds suing Porsche

Reuters – In August, when New York State Supreme Court Justice Charles Ramos denied Porsche’s motion to dismiss a $1 billion fraud case brought by several hedge funds that blamed Porsche for manipulating the market for Volkswagen shares, it was a momentous ruling for investors with securities claims against foreign defendants.

The hedge funds suing Porsche had been bounced out of federal court under Morrison v. National Australia Bank, and though Porsche argued that New York state court wasn’t the appropriate forum for the funds’ suit, Ramos said New York-based investors who engaged in due diligence at their New York offices have the right to sue in state court. His decision was regarded as a sign that for some investors, state court is a viable alternative for cases Morrison bars from federal court.